Special Delivery
Like many online companies, BigStar Entertainment Inc. isn’t profitable yet. The 2-year-old firm reported net sales of $5.2 million for the first quarter of 2000 – and a net loss of $7 million.
But it has something else: a database with 2 million customers listed on it, and the proven ability to target. The firm, which markets videos and discs through an online catalog, sends personalized e-mails and newsletters to 10,000 customer segments, generating an unsubscribe rate of less than 1%.
Those efforts should pay off soon, for BigStar clearly has a popular following. The Web site (www.bigstar.com), which offers 70,000 movie titles, averages 3 million visits per month, including 1.2 million multiple visits, according to David Levitsky, executive president of BigStar, and a former marketing director at Columbia House.
It’s no small job to test and roll out 10 to 15 e-mail campaigns per week. The tests typically require the crunching of 30 offers and 30 demographic variables.
The promotions are done with Advaya Inc., an e-mail agency subsidiary (formerly an in-house division that was spun off in April). Advaya helped BigStar develop an intricate system of programmed queries, which are used for personalization. The firm can target 300,000 to 500,000 e-mails per hour, using five or six data points to personalize each one, says Doug Garfinkel, vice president of marketing at Advaya.
Consumers provide e-mail addresses and demographic information to receive free newsletters and various promotional incentives for discounts on orders.
BigStar begins by asking consumers to register their e-mail address. Later it asks about income, presence of children and entertainment preferences. BigStar also tracks behavior, including the opening of e-mails.
The firm generates Web traffic through links and banner advertising on other Web sites where consumers previously registered their e-mail addresses by filling out online forms.
BigStar’s list-sharing partners include Yahoo!Chat, America Online, Earthlink, Moviefone.com, FortuneCity.com, Black Star, The New York Times on the Web and Gay.com.
The best performing list segments become the next day’s control group.
“We see the test results by evening and use them the next day,” says Levitsky.
Customer e-mail usually generates 10% to 20% clickthrough rates for inquiries, and similar double-digit conversion rates for orders, says Levitsky. Prospecting e-mail typically generates 2% to 8% clickthrough rates for inquiries, and 3% to 4% conversion rates for sales.
BigStar pulls the highest clickthrough response rates using interactive e-mail with graphics and pictures, but it still uses text-only e-mail to reach consumers unable to receive the more advanced formats.
Meanwhile the firm has curtailed its use of banner ads as it has gained e-mail experience. Spending millions of dollars to distribute banner impressions through Web sites is less productive than the results this company achieves with e-mail, says Levitsky.
What’s next? Starting in October, BigStar plans to begin targeting promotions through wireless devices such as pagers, cell phones and other hand-held digital devices. Beta tests already under way have not yet involved actual customers, says Levitsky.
